-- The Walt Disney Co. and two former directors who fought for two years have agreed to a truce, including dropping a shareholder lawsuit challenging the selection of the company's new chief executive.

The company said Friday it has named former director Roy E. Disney, nephew of the late Walt Disney, as a director emeritus and a consultant.

In exchange, Roy Disney and former board member Stanley P. Gold agreed not to run a challenge slate of directors or submit shareholder resolutions for the next five years. The two also pledged to back the leadership of Robert A. Iger, who will succeed longtime chief executive Michael D. Eisner in September.

In a statement, the company reaffirmed its commitment to rotate members of the board's committees as the company's corporate governance guidelines require.

"In putting aside their differences, the company noted Mr. Disney's long time devotion to the company and welcomed the re-establishment of a relationship with him and his family," the statement said.

The two directors also acknowledged Eisner's "contribution to the company over the years," the statement said.

The agreement was reached after several meetings between Iger and the two dissidents.

Roy Disney and Gold resigned from Disney's board in November 2003 and began a campaign to oust Eisner, who was then serving as chairman and chief executive.

The directors complained that Disney's stock price had underperformed since 1996 and that Eisner's contentious management style was responsible for the ending of lucrative partnerships with Miramax founders Bob and Harvey Weinstein and with Pixar Animation Studios.

Their campaign culminated in a raucous meeting in March 2004 at which shareholders delivered a vote of no confidence against Eisner and several directors.

In response to the vote, Eisner relinquished his role as chairman and, six months later, announced his retirement after more than 20 years at the helm.

Disney's performance has improved significantly over the past two years, with the company delivering double-digit earnings growth and projecting similar growth through at least 2007.

Since being named Eisner's successor, Iger has worked to ease tensions with partners and smooth ruffled feathers among the company's own executives.

He is credited with helping to negotiate a peaceful end to the Weinsteins' contract, while retaining Miramax's profitable film library. Iger also has restarted talks with Pixar chief executive Steve Jobs.

Roy E. Disney returns as a director emeritus.